Underscoring tensions over the Israel settlement issue, Secretary of State Hillary Clinton strongly criticized an ill-timed announcement of 1,600 new housing units in a call to Prime Minister Benjamin Netanyahu.

Tel Aviv, Israel — A day after Vice President Joe Biden ended a fence-mending trip marred by the Israel settlement issue, tension hung over the embattled city of Jerusalem both in the streets and in government offices.

Israeli police in the capital went on high alert for violent demonstrations after Friday prayers in East Jerusalem – and the military enforced a total closure on Palestinians in the West Bank. Claimed by Palestinians as their future capital, it is increasingly emerging as the front line between competing Israeli and Palestinian visions for statehood.

In what was reportedly a 43-minute conversation, Clinton "[made] clear the United States considered the announcement a deeply negative signal about Israel's approach to the bilateral relationship and counter to the spirit of the vice president's trip," said State Department spokesperson P.J. Crowley.

"The secretary said she could not understand how this happened, particularly in light of the United States' strong commitment to Israel's security," added Mr. Crowley.

50,000 housing units reportedly under way

Control over the city was once considered the final and ultimate dispute for Israeli and Palestinian negotiators. But in recent weeks, it has been brought front and center by weekly rioting, demonstrations, and plans for new building projects.

The intensification of the dispute over the city holy to three religions jeopardizes last weekend's agreement to restart peace talks – the first in more than a year. In recent days, the Palestinians have called on the US to force Israel to drop the building project.

"If Israel will continue business as usual with settlements, and the Americans are not in a position to do anything in this regard, that's something that the Palestinian leadership has difficulty living with,'' said government spokesman Ghassan Khatib.

In addition to the 1,600 units announced this week for ultra-Orthodox families in the Jerusalem neighborhood of Ramat Shlomo, the Israeli government has plans for a total of 50,000 more housing units in east Jerusalem in the coming years, Haaretz reported this week.

Israeli parliament speaker: We must say clearly we won't compromise

The building plans outrage the Palestinians who see Israel's building over the Green Line in Jerusalem as a plan to block any compromise in Jerusalem. Israel's government considers the city, which was united in 1967 after 18 years of divided rule, part of the "eternal capital'' of the Jewish state.

Israeli Parliament Speaker Reuven Rivlin said that Israel should be honest with the Palestinians and the US that it will not compromise: "We must say clearly and put it on the table. You can't talk about peace if Jerusalem is divided."

The drama is playing out at flash points around the city. In the past three weeks, Palestinians and police have clashed several times on the Temple Mount complex. The location that includes both Judaism's holiest site and Islam's third holiest threatens to turn a political dispute into a holy war.

'An affront to the US'

Outside of the Old City and in Palestinian neighborhoods, there were isolated instances Friday of Palestinians throwing rocks at Israeli police. In addition to the building projects, Palestinians are upset by attempts of right-wing Jewish Israelis to buy up property in their neighborhoods. In the Jerusalem village of Silwan, the municipality wants to destroy about 90 Palestinian homes – allegedly built without permits – and turn the neighborhood into a park and tourist commercial center. The plan has stirred opposition from Palestinians.

"The principal challenge for the US today, at the diplomatic level, is to quickly move forward in the negotiations, put ideas on the table, and get a serious debate going on both sides about what a two-state solution might look like,'' he said in an email. "The unfortunate events of the past week, which are widely viewed in Washington as an affront to the United States, can be dealt with most effectively through private channels.''